DIAGNOSE YOURSELF: PART 2
I feel a little like a broken record for repeating this, but this is a multipart topic built on you having certain things in front of you as you compare and contrast the information we are discussing. If you have not downloaded and filled out the Summit Practice Solutions Growth Analysis Spreadsheet, do this now and fill it out. You will also need to go back and read the Introduction and also Part 1 in order to catch up. Remember also that you should have a year-to-date Profit and Loss Statement as well as one week’s schedule to refer to. This will be an in depth look at where you are currently as well as a plan for what’s next.
Today we are going to look at the second page of your Growth Analysis Spreadsheet. In this discussion I will go back and tie together the information we saw last week when we looked at the first page. I want to take these line-item by line-item, so I will just bullet point each line as well as the average that will appear in blue on your far right.
- Total Days Office Open: We already took the time to give an example about hours and how time and money are connected, so I won’t spend much time here, other than to remind each of you that Monday-Thursdays from 8-5 are the exact days and times that no one would want to come in. If you are stuck in a rut (a grave with the ends kicked out) as far as your hours and days worked, please rethink and recalibrate your business strategy to embrace change and be sensitive to the ever-changing whims of the consumer. In every category we want to try and give the patients more of what they want and less of what they don’t want. The most common average for this is 4 days a week and about 16 days a month.
- Total of Doctors Days Worked and Days that Hygienists Worked: I have combined these next two line-items. The take away here is that your goal is to have twice the number of hygiene hours as doctor’s hours. You will find that your production will drastically change if you can support two full time hygienists per doctor. 67% of all the productive dentistry that you will ever do will come out of recall hygiene.
- Number of Patients Referred by Existing Patients: This is one of the most important stats you should follow. The number of direct referrals form existing patients is the strongest indicator of whether or not you are inspiring your patients. It should be 50% or greater. It doesn’t matter how many new patients you have, if you are not hitting a 50%+ direct referral it will not be sustainable. From a cost perspective, direct referrals are not costing you anything. Direct referrals say “yes” to more of your treatment suggestions. They also have a tendency to refer others because that is how they came to you. This is a full-time, full court press to ask for and earn referrals. You will also find that your online reputation will soar as your percentage of new patients increase from direct referrals. When you consider that your online reviews are the number one source of confirmation on your reputation, this has to be a priority. These new patients are the result of your internal marketing strategies.
- Number of New Patients From Other Sources: This is the result of external sources of patients. Take the time to look at your Profit and Loss Statement and figure out the dollar amount as well as the percentage of collections that dollar amount represents on a monthly basis. You should be spending 3%-5% if you have been in practice 3 years or longer. If you are in a professional building without line of sight view of your office from consumers or have no signage, you need to add an additional $5,000 a month minimally to maintain the ideal 40-70 new patients per month per dentist. An average practice would have 20-30 which will not guarantee a consistent growth rate of 15% yearly. Once you know the total number of new patients, subtract the patients that have come from internal referrals. If you had 30 total and 50% were direct referrals then once you subtracted the 15 from 30, you would have 15 from other sources. These direct referrals were not actually attracted by the money you spend monthly. Next, calculate the number of new patients from PPOs. Lets’ say in this case it was 10. These ten chose you because you were in network and included in their employers list of dentists accepting their insurance, which again, was not money spent from your P & L category of marketing. So, we have 15 direct referrals, and 10 from PPOs that came in for reasons other than your external marketing. The last 5 are the results of all the money you spent on external marketing. Next divide the patients that came in from marketing (5) into the amount of money you spent to attract them. If it goes over $150/new patient from external marketing, you are paying too much. It is time to search for help with your marketing from someone else.
- Total Numbers of New Patients: The 20-30 that an average practice normally gets each month is just a starting point. You will need at least double that for consistent growth.
- Total Production: This is total unadjusted production or production before write-offs.
- Total Write-Offs and Adjustments: This generally runs 25%-37% in most offices if they are in-network for a majority of insurance companies in their area. Make sure that regardless of your adjusted fees with any PPO, that you always submit your total fee for service fee and let the insurance company do the adjustment. Failing this, you will never get any upward reimbursement adjustments from the insurance company.
- Net Production Total: This is where the rubber meets the road. This points back to the production per employee and production per op. This is controlled by your treatment mix, number of new patients, clinical speed, and, of course, number of hours you work.
- Total Collections: In today’s world of outside financing, this number should easily be more than a 100% if you are offering pre-payment adjustments.
- Total Doctor Production and Total Hygiene Production: This will be explained on the last page and is extremely important to profitability. Both the doctor and hygienist must hit their benchmarks for a profitable practice.
The last questions on page two are quick and simple but actually offer a lot when we consider the strategies and exiting circumstances you should consider. I will take these up next week. If you have any questions please call, text, or email me. Keep in mind that I am not trying to tell you what to think, but rather, how to think about your numbers and their implication on your business results.
Michael Abernathy, DDS
PS. The Revised and Expanded 2nd Edition of The Super General Dental Practice book is now available. If you liked the original, you’ll really love this one. If you missed the original, you don’t want to miss this one. Order yours today by clicking on this link.